Business Wire | Aug 13, 2020 06:45AM EDT

WESCO International, Inc. Reports Second Quarter 2020 Results

Aug. 13, 2020

PITTSBURGH--(BUSINESS WIRE)--Aug. 13, 2020--WESCO International, Inc. (NYSE: WCC), a leading provider of business-to-business distribution, logistics services and supply chain solutions, announces its results for the second quarter of 2020.

Mr. John J. Engel, WESCO's Chairman, President and CEO, commented, "We delivered a strong second quarter where our sales, margin, profit and cash generation results exceeded our expectations. Business momentum improved through the quarter as we outperformed the market and built an all-time record backlog. As we have done in prior economic downturns, we aggressively managed our WESCO business and took significant cost reduction and cash management actions, which enabled us to deliver decremental margins of 10% and generate exceptionally strong free cash flow of 248% of adjusted net income. Anixter also delivered a strong performance to close out the second quarter. I would like to recognize and thank all of our associates for their inspirational dedication, commitment and hard work in effectively managing through this COVID-19 driven crisis."

Mr. Engel added, "The second quarter will prove to be a watershed period in our history, as we successfully closed on our industry-shaping merger of WESCO and Anixter. In combining two industry-leading Fortune 500 companies with successful track records, we are creating the premier electrical, communications and utility distribution and supply chain solutions company in the world. Against the challenges imposed by the global pandemic, the extraordinary determination of our WESCO and Anixter associates to execute a flawless day one closing, just five months after signing the merger agreement, was impressive. I could not be more proud of the entire team in achieving this noteworthy milestone."

Mr. Engel continued, "We have been executing a detailed, rigorous and process-oriented integration planning effort over the last several months. Now, all of our integration efforts and organizational focus shift from planning to execution and synergy realization. We are off to an excellent start in our first six weeks since closing, and have already completed actions to deliver over 50% of our year one cost synergy target of $68 million. We have also begun to realize our first sales synergies through leveraging our expanded global footprint and cross-selling our broader product and services portfolio. The strong cultural alignment between WESCO and Anixter is proving to be a key driver of our initial success. We are building on these early successes and remain highly confident in capturing the significant upside potential and exceeding our three year cost savings, sales growth, and cash generation synergy targets. With this merger, the new WESCO will capitalize on the accelerating secular trends of electrification, increased bandwidth demand driven by higher voice, data, video and mobile usage, and the digitization of our B2B value chain. We are more bullish than ever in the substantial value creation that this transformational combination will create for our customers, supplier partners, employees, investors, and the communities in which we operate."

The following are results for the three months ended June 30, 2020 compared to the three months ended June 30, 2019:

* Net sales were $2.1 billion for the second quarter of 2020, compared to $2.2 billion for the second quarter of 2019, a decrease of 2.9%. Organic sales for the second quarter of 2020 declined by 12.3% as the Anixter merger on June 22, 2020 positively impacted net sales by 10.3%.

* Cost of goods sold for the second quarter of 2020 and 2019 was $1.7 billion, and gross profit was $393.8 million and $409.0 million, respectively. As a percentage of net sales, gross profit was 18.9% and 19.0% for the second quarter of 2020 and 2019, respectively.

* Selling, general and administrative expenses were $359.8 million, or 17.2% of net sales, for the second quarter of 2020, compared to $295.9 million, or 13.8% of net sales, for the second quarter of 2019. SG&A expenses for the second quarter of 2020 include $73.3 million of costs related to the merger with Anixter. Adjusted for these costs, SG&A expenses were $286.4 million, or 13.7% of net sales, for the second quarter of 2020. As further adjusted for the nine days of legacy Anixter results, SG&A expenses were $262.8 million, or 14.1% of net sales, reflecting the favorable impact of cost actions initiated in response to the COVID-19 pandemic.

* Operating profit was $15.3 million for the second quarter of 2020, compared to $97.9 million for the second quarter of 2019. Operating profit as a percentage of net sales was 0.7% for the current quarter, compared to 4.6% for the second quarter of the prior year. Adjusted for merger-related costs of $73.3 million, operating profit was $88.6 million for the second quarter of 2020, or 4.2% of net sales. As further adjusted for the nine days of legacy Anixter results, operating profit was $70.2 million, or 3.8% of net sales, representing a decremental margin of approximately 10%.

* Net interest and other for the second quarter of 2020 was $60.6 million, compared to $17.3 million for the second quarter of 2019. Net interest and other for the second quarter of 2020 includes $44.7 million of merger-related financing and interest costs, of which $33.5 million was non-recurring.

* The effective tax rate for the second quarter of 2020 was 24.0%, compared to 21.6% for the second quarter of 2019. The higher effective tax rate in the current quarter is primarily due to costs incurred to complete the merger with Anixter. Excluding the impact of the merger, the effective tax rate for the current quarter would have been approximately 22%.

* Net loss attributable to common stockholders was $35.8 million for the second quarter of 2020, compared to net income attributable to common stockholders of $63.5 million for the second quarter of 2019. Adjusted for merger-related costs, net income attributable to common stockholders was $57.2 million for the second quarter of 2020. As further adjusted for the nine days of legacy Anixter results, net income attributable to common stockholders was $43.6 million.

* Loss per diluted share for the second quarter of 2020 was $0.84, based on 42.7 million diluted shares, compared to earnings per diluted share of $1.45 for the second quarter of 2019, based on 43.8 million diluted shares. Adjusted for merger-related costs, earnings per diluted share for the second quarter of 2020 was $1.36, based on 42.0 million adjusted diluted shares. As further adjusted for the nine days of legacy Anixter results, earnings per diluted share was $1.04, based on 42.0 million adjusted diluted shares.

* Operating cash flow for the second quarter of 2020 was an inflow of $101.2 million, compared to an outflow of $37.7 million for the second quarter of 2019. Free cash flow for the second quarter of 2020 was $141.9 million, or 248% of adjusted net income. The net cash outflow in the second quarter of 2019 was primarily driven by working capital growth as a result of higher sales in the latter part of the quarter last year.

The following are results for the six months ended June 30, 2020 compared to the six months ended June 30, 2019:

* Net sales were $4.1 billion for the first six months of 2020 and 2019, a decrease of 1.4%. Organic sales for the first six months of 2020 declined by 7.3% as the Anixter merger on June 22, 2020 positively impacted net sales by 5.6%.

* Cost of goods sold for the first six months of 2020 and 2019 was $3.3 billion, and gross profit was $770.2 million and $791.5 million, respectively. As a percentage of net sales, gross profit was 19.0% and 19.3% for the first six months of 2020 and 2019, respectively.

* Selling, general and administrative expenses were $659.1 million, or 16.3% of net sales, for the first six months of 2020, compared to $592.4 million, or 14.4% of net sales, for the first six months of 2019. SG&A expenses for the first six months of 2020 include $78.0 million of costs related to the merger with Anixter. Adjusted for these costs, SG&A expenses were $581.1 million, or 14.3% of net sales, for the first six months of 2020. As further adjusted for the nine days of legacy Anixter results, SG&A expenses were $557.5 million, or 14.5% of net sales, reflecting the favorable impact of cost actions initiated in response to the COVID-19.

* Operating profit was $76.2 million for the first six months of 2020, compared to $168.7 million for the first six months of 2019. Operating profit as a percentage of net sales was 1.9% for the current six month period, compared to 4.1% for the prior six month period. Adjusted for merger-related costs of $78.0 million, operating profit was $154.1 million for the first six months of 2020, or 3.8% of net sales. As further adjusted for the nine days of legacy Anixter results, operating profit was $135.8 million, or 3.5% of net sales.

* Net interest and other for the first six months of 2020 was $77.1 million, compared to $34.4 million for the first six months of 2019. Net interest and other for the first six months of 2020 includes $45.3 million of merger-related financing and interest costs, of which $33.5 million was non-recurring.

* The effective tax rate for the first six months of 2020 was 67.3%, compared to 21.7% for the first six months of 2019. The higher effective tax rate in the current six month period is primarily due to costs incurred to complete the merger with Anixter. Excluding the impact of the merger, the effective tax rate for the current six month period would have been approximately 22%.

* Net loss attributable to common stockholders was $1.4 million for the first six months of 2020, compared to net income attributable to common stockholders of $105.8 million for the first six months of 2019. Adjusted for merger-related costs, net income attributable to common stockholders was $95.6 million for the six months ended June 30, 2020. As further adjusted for the nine days of legacy Anixter results, net income attributable to common stockholders was $82.0 million.

* Loss per diluted share for the first six months of 2020 was $0.03, based on 42.3 million diluted shares, compared to earnings per diluted share of $2.37 for the first six months of 2019, based on 44.7 million diluted shares. Adjusted for merger-related costs, earnings per diluted share for the current six month period was $2.28, based on 42.0 million adjusted diluted shares. As further adjusted for the nine days of legacy Anixter results, earnings per diluted share was $1.95, based on 42.0 million adjusted diluted shares.

* Operating cash flow for the first six months of 2020 was an inflow of $132.7 million, compared to an outflow of $8.7 million for the first six months of 2019. Free cash flow for the first six months of 2020 was $161.7 million, or 169% of adjusted net income.

Webcast and Teleconference Access

WESCO will conduct a webcast and teleconference to discuss the second quarter of 2020 earnings as described in this News Release on Thursday, August 13, 2020, at 10:00 a.m. E.T. The call will be broadcast live over the internet and can be accessed from the Investor Relations page of the Company's website at www.wesco.investorroom.com. The call will be archived on this internet site for seven days.

WESCO International, Inc. (NYSE: WCC), a publicly traded FORTUNE 500(r) company headquartered in Pittsburgh, Pennsylvania, is a leading provider of business-to-business distribution, logistics services and supply chain solutions. Pro forma 2019 annual sales were over $17 billion, including Anixter International Inc., which it acquired in June 2020. WESCO offers a best-in-class product and services portfolio of Electrical and Electronic Solutions, Communications and Security Solutions, and Utility and Broadband Solutions. The Company employs over 18,000 people, maintains relationships with over 30,000 suppliers, and serves more than 150,000 customers worldwide. With nearly 1.5 million products, end-to-end supply chain services, and leading digital capabilities, WESCO provides innovative solutions to meet customer needs across commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. WESCO operates nearly 800 branch and warehouse locations in over 50 countries, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations.

Forward-Looking Statements

All statements made herein that are not historical facts should be considered as forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. These statements include, but are not limited to, statements regarding the process to divest the legacy WESCO Utility and Datacom businesses in Canada, including the expected length of the process, the expected benefits and costs of the transaction between WESCO and Anixter International Inc., including anticipated future financial and operating results, synergies, accretion and growth rates, and the combined company's plans, objectives, expectations and intentions, statements that address the combined company's expected future business and financial performance, and other statements identified by words such as "anticipate," "plan," "believe," "estimate," "intend," "expect," "project," "will" and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of WESCO's management, as well as assumptions made by, and information currently available to, WESCO's management, current market trends and market conditions and involve risks and uncertainties, many of which are outside of WESCO's and WESCO's management's control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements.

Those risks, uncertainties and assumptions include the risk of any unexpected costs or expenses resulting from the transaction, the risk of any litigation or post-closing regulatory action relating to the transaction, the risk that the transaction could have an adverse effect on the ability of the combined company to retain customers and retain and hire key personnel and maintain relationships with its suppliers, customers and other business relationships and on its operating results and business generally, the risk that problems may arise in successfully integrating the businesses of the companies or that the combined company could be required to divest one or more businesses, which may result in the combined company not operating as effectively and efficiently as expected, the risk that the combined company may be unable to achieve synergies or other anticipated benefits of the proposed transaction or it may take longer than expected to achieve those synergies or benefits, the risk that the leverage of the company may be higher than anticipated, the impact of natural disasters, health epidemics and other outbreaks, especially the outbreak of COVID-19 since December 2019, which may have a material adverse effect on the combined company's business, results of operations and financial conditions, the risk that the divesture of the legacy WESCO Utility and Datacom businesses in Canada may take longer than expected and other important factors that could cause actual results to differ materially from those projected. All such factors are difficult to predict and are beyond each company's control. Additional factors that could cause results to differ materially from those described above can be found in WESCO's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and WESCO's other reports filed with the U.S. Securities and Exchange Commission ("SEC").

WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(dollar amounts in thousands, except per share amounts)

(Unaudited)

Three Months Ended

June 30, 2020 June 30, 2019

Net sales $ 2,086,706 $ 2,150,088

Cost of goods sold(excluding depreciation and 1,692,931 81.1 % 1,741,114 81.0 %amortization)

Selling, general and 359,750 17.2 % 295,842 13.8 %administrative expenses

Depreciation and 18,755 15,182 amortization

Income from operations 15,270 0.7 % 97,950 4.6 %

Net interest and other 60,583 17,307

(Loss) income before income (45,313 ) (2.2 ) % 80,643 3.8 %taxes

Income tax (benefit) expense (10,854 ) 17,428

Net (loss) income (34,459 ) (1.7 ) % 63,215 2.9 %

Net income (loss)attributable to 47 (249 ) noncontrolling interests

Net (loss) incomeattributable to WESCO (34,506 ) (1.7 ) % 63,464 3.0 %International, Inc.

Preferred stock dividends 1,276 -

Net (loss) incomeattributable to common $ (35,782 ) (1.7 ) % $ 63,464 3.0 %stockholders



(Loss) earnings per shareattributable to common $ (0.84 ) $ 1.45 stockholders

Weighted-average commonshares outstanding andcommon share equivalentsused in computing (loss) 42,683 43,816 earnings

per diluted common share (inthousands)

WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(dollar amounts in thousands, except per share amounts)

(Unaudited)

Six Months Ended

June 30, 2020 June 30, 2019

Net sales $ 4,055,353 $ 4,111,355

Cost of goods sold (excluding 3,285,179 81.0 % 3,319,886 80.7 %depreciation and amortization)

Selling, general and 659,143 16.3 % 592,370 14.4 %administrative expenses

Depreciation and amortization 34,848 30,424

Income from operations 76,183 1.9 % 168,675 4.1 %

Net interest and other 77,055 34,427

(Loss) income before income (872 ) - % 134,248 3.3 %taxes

Income tax (benefit) expense (587 ) 29,084

Net (loss) income (285 ) - % 105,164 2.6 %

Net loss attributable to (185 ) (668 ) noncontrolling interests

Net (loss) income attributable (100 ) - % 105,832 2.6 %to WESCO International, Inc.

Preferred stock dividends 1,276 -

Net (loss) income attributable $ (1,376 ) - % $ 105,832 2.6 %to common stockholders



(Loss) earnings per shareattributable to common $ (0.03 ) $ 2.37 stockholders

Weighted-average common sharesoutstanding and common shareequivalents used in computing 42,260 44,661 (loss) earnings per dilutedcommon share (in thousands)

WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollar amounts in thousands)

(Unaudited)

June 30, December 31, 2020 2019

Assets

Current Assets

Cash and cash equivalents $ 265,222 $ 150,902

Trade accounts receivable, net 2,454,262 1,187,359

Inventories 2,368,827 1,011,674

Other current assets 350,075 190,476

Total current assets 5,438,386 2,540,411



Other assets 6,293,628 2,477,224

Total assets $ 11,732,014 $ 5,017,635





Liabilities and Stockholders' Equity

Current Liabilities

Accounts payable $ 1,660,094 $ 830,478

Short-term borrowings and current debt 27,696 26,685

Other current liabilities 613,936 226,896

Total current liabilities 2,301,726 1,084,059



Long-term debt, net 5,068,549 1,257,067

Other noncurrent liabilities 1,261,338 417,838

Total liabilities 8,631,613 2,758,964



Stockholders' Equity

Total stockholders' equity 3,100,401 2,258,671

Total liabilities and stockholders' equity $ 11,732,014 $ 5,017,635

WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

(Unaudited)

Six Months Ended

June 30, June 30, 2020 2019

Operating Activities:

Net (loss) income $ (285 ) $ 105,164

Add back (deduct):

Depreciation and amortization 34,848 30,424

Deferred income taxes 1,062 1,983

Change in trade receivables, net 29,302 (157,387 )

Change in inventories 55,431 (39,655 )

Change in accounts payable (83,085 ) 62,484

Other 95,415 (11,788 )

Net cash provided by (used in) operating activities 132,688 (8,775 )



Investing Activities:

Capital expenditures (27,163 ) (21,402 )

Other^(1) (3,700,792 ) (28,897 )

Net cash used in investing activities (3,727,955 ) (50,299 )



Financing Activities:

Debt borrowings, net^(2) 3,800,637 199,934

Equity activity, net (2,025 ) (152,722 )

Other^(3) (85,605 ) 2,803

Net cash provided by financing activities 3,713,007 50,015



Effect of exchange rate changes on cash and cash (3,420 ) (66 )equivalents



Net change in cash and cash equivalents 114,320 (9,125 )

Cash and cash equivalents at the beginning of the 150,902 96,343 period

Cash and cash equivalents at the end of the period $ 265,222 $ 87,218

^ Includes payments to acquire Anixter of $3,708.3 million, net of cash(1) acquired of $103.4 million.

Primarily includes the net proceeds from the issuance of senior unsecured^ notes of $2,815.0 million, as well as borrowings under a new asset-based(2) revolving credit facility and an amended account receivable securitization facility. These cash inflows were used to fund the merger.

^ Includes approximately $79.5 million of costs associated with the debt(3) financing used to fund a portion of the merger with Anixter.

NON-GAAP FINANCIAL MEASURES

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") above, this earnings release includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross profit, gross margin, decremental operating margin, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, pro forma adjusted EBITDA, financial leverage, pro forma financial leverage, free cash flow, adjusted income from operations, adjusted operating margin, adjusted net income, and adjusted earnings per diluted share. The Company believes that these non-GAAP measures are useful to investors as they provide a better understanding of sales performance, and the use of debt and liquidity on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude transactions impacting comparability of results, allowing investors to more easily compare the Company's financial performance from period to period. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.

WESCO INTERNATIONAL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(dollar amounts in thousands, except organic sales data) (Unaudited)

Three Months Ended Six Months Ended

Organic Sales Growth: June 30, June 30, 2020 2020



Change in net sales (2.9 )% (1.4 )%

Impact from acquisitions 10.3 % 5.6 %

Impact from foreign exchange rates (0.9 )% (0.5 )%

Impact from number of workdays - % 0.8 %

Organic sales growth (12.3 )% (7.3 )%

Note: Organic sales growth is a measure of sales performance. Organic salesgrowth is calculated by deducting the percentage impact from acquisitions inthe first year of ownership, foreign exchange rates and number of workdays fromthe overall percentage change in consolidated net sales.

Three Months Ended Six Months Ended

Gross Profit: June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019



Net sales $ 2,086,706 $ 2,150,088 $ 4,055,353 $ 4,111,355

Cost of goodssold (excludingdepreciation 1,692,931 1,741,114 3,285,179 3,319,886 andamortization)

Gross profit $ 393,775 $ 408,974 $ 770,174 $ 791,469

Gross margin 18.9 % 19.0 % 19.0 % 19.3 %

Note: Gross profit is a financial measure commonly used within the distributionindustry. Gross profit is calculated by deducting cost of goods sold, excludingdepreciation and amortization, from net sales. Gross margin is calculated bydividing gross profit by net sales.

Three Months Ended

Decremental Operating Margin: June 30, 2020 June 30, 2019 Change

Adjusted Reported WESCO^(1)

Net sales $ 1,864,849 $ 2,150,088 $ (285,239 )

Income from operations 70,248 97,950 (27,702 )

Decremental operating margin 10 %

^(1) See below for a reconciliation of adjusted WESCO results.

Note: Decremental operating margin is defined as the year-over-year decline inincome from operations divided by the year-over-year decline in net sales.Decremental operating margin is a financial measure commonly used in aneconomic downturn to assess the Company's ability to reduce operating costs inresponse to declining sales.

WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollar amounts in thousands)

(Unaudited)

Pro Forma Reported

Twelve Months Twelve Months Ended Ended

Financial Leverage: June 30, December 31, 2020 2019



Net income attributable to WESCO $ 319,580 $ 223,426

Net loss attributable to noncontrolling (1,163 ) (1,228 )interests

Preferred stock dividends 1,276 -

Income tax (benefit) expense 54,503 59,863

Interest expense, net 177,157 64,156

Depreciation and amortization 132,719 62,107

EBITDA $ 684,072 $ 408,324

Stock-based compensation 47,429 19,062

Foreign exchange and other 3,991 614

Merger-related costs 122,283 3,130

Adjusted EBITDA $ 857,775 $ 431,130



June 30, December 2020 31, 2019

Short-term borrowings and current debt $ 27,696 $ 26,685

Long-term debt 5,068,549 1,257,067

Debt discount and debt issuance costs^(1) 96,322 8,876

Fair value adjustments to Anixter Notes due (2,017 ) - 2023 and 2025^(1)

Total debt 5,190,550 1,292,628

Less: cash and cash equivalents 265,222 150,902

Total debt, net of cash $ 4,925,328 $ 1,141,726



Financial leverage ratio 5.7 2.6

Long-term debt is presented in the condensed consolidated balance sheets^ net of debt discount and debt issuance costs, and include adjustments to(1) record the long-term debt assumed in the merger with Anixter at its acquisition date fair value.

Note: Financial leverage measures the use of debt. Financial leverage ratio iscalculated by dividing total debt, excluding debt discount and debt issuancecosts, net of cash, by adjusted EBITDA. EBITDA is defined as the trailingtwelve months earnings before interest, taxes, depreciation and amortization.Adjusted EBITDA is defined as the trailing twelve months EBITDA before foreignexchange and other non-operating expenses, non-cash stock-based compensation,and costs associated with the merger with Anixter. Pro forma financial leverageratio is calculated by dividing total debt, excluding debt discount and debtissuance costs, net of cash, by pro forma adjusted EBITDA. Pro forma EBITDA andpro forma adjusted EBITDA gives effect to the combination of WESCO and Anixteras if it had occurred at the beginning of the respective trailing twelve monthperiod.

WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollar amounts in thousands)

(Unaudited)

Three Three Months Ended Months Ended

Free Cash Flow: June 30, 2020 June 30, 2019

Total Anixter WESCO

Cash flow provided by $ 101,160 $ 39,176 $ 61,984 $ (37,584 )(used in) operations

Less: Capital (11,401 ) (601 ) (10,800 ) (10,574 )expenditures

Add: Merger-related 52,142 - 52,142 - expenditures

Free cash flow $ 141,901 $ 38,575 $ 103,326 $ (48,158 )

Percentage of adjusted 248 % 278 % 238 % (76 )net income %

Six Months Ended Six Months Ended

Free Cash Flow: June 30, 2020 June 30, 2019

Total Anixter WESCO

Cash flow provided by $ 132,688 $ 39,176 $ 93,512 $ (8,775 )(used in) operations

Less: Capital (27,163 ) (601 ) (26,562 ) (21,402 )expenditures

Add: Merger-related 56,134 - 56,134 - expenditures

Free cash flow $ 161,659 $ 38,575 $ 123,084 $ (30,177 )

Percentage of adjusted 169 % 278 % 151 % (29 )net income %

Note: Free cash flow is a measure of liquidity. Capital expenditures arededucted from operating cash flow to determine free cash flow. Free cash flowis available to fund investing and financing activities. For the three and sixmonths ended June 30, 2020, the Company paid certain fees, expenses and othercosts to consummate the merger with Anixter. Such expenditures have been addedback to cash flow provided by operations to determine free cash flow for suchperiods

WESCO INTERNATIONAL, INC.RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(dollar amounts in thousands, except per share amounts) (Unaudited)

The following tables set forth adjusted net income attributable to common stockholder and adjusted earnings per diluted share for the periods presented:

Adjusted NetIncome Three Months Ended Three MonthsAttributable Endedto CommonStockholdersand AdjustedEarnings Per June 30, 2020 June 30, 2019Diluted Share:

(In thousands, Adjustments Adjusted Anixter^ Adjustedexcept per Reported ^(1) Consolidated (2) WESCO Reportedshare data)

Net sales $ 2,086,706 $ - $ 2,086,706 $ 221,857 $ 1,864,849 $ 2,150,088

Cost of goodssold(excluding 1,692,931 - 1,692,931 176,743 1,516,188 1,741,114 depreciation andamortization)

Selling,general and 359,750 73,345 286,405 23,655 262,750 295,842 administrative expenses

Depreciationand 18,755 - 18,755 3,092 15,663 15,182 amortization

Income from 15,270 (73,345 ) 88,615 18,367 70,248 97,950 operations

Net interest 60,583 44,738 15,845 543 15,302 17,307 and other

(Loss) incomebefore income (45,313 ) (118,083 ) 72,770 17,824 54,946 80,643 taxes

Income tax(benefit) (10,854 ) (26,363 ) 15,509 3,961 11,548 17,428 expense

Net (loss) (34,459 ) (91,720 ) 57,261 13,863 43,398 63,215 income

Net income(loss)attributable 47 - 47 209 (162 ) (249 )to noncontrollinginterests

Net (loss)incomeattributable (34,506 ) (91,720 ) 57,214 13,654 43,560 63,464 to WESCO International,Inc.

Preferredstock 1,276 1,276 - - - - dividends

Net (loss)incomeattributable $ (35,782 ) $ (92,996 ) $ 57,214 $ 13,654 $ 43,560 $ 63,464 to commonstockholders



Adjusteddiluted shares 42,683 41,969 41,969 43,816 ^(3)

Adjustedearnings per $ (0.84 ) $ 1.36 $ 1.04 $ 1.45 diluted share

WESCO INTERNATIONAL, INC.RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(dollar amounts in thousands, except per share amounts) (Unaudited)

Adjusted NetIncome Six Months Ended Six MonthsAttributable Endedto CommonStockholdersand AdjustedEarnings Per June 30, 2020 June 30, 2019Diluted Share:

(In thousands, Adjustments Adjusted Adjustedexcept per Reported ^(1) Consolidated Anixter^(2) WESCO Reportedshare data)

Net sales $ 4,055,353 $ - $ 4,055,353 $ 221,857 $ 3,833,496 $ 4,111,355

Cost of goodssold(excluding 3,285,179 - 3,285,179 176,743 3,108,436 3,319,886 depreciation andamortization)

Selling,general and 659,143 77,953 581,190 23,655 557,535 592,370 administrative expenses

Depreciationand 34,848 - 34,848 3,092 31,756 30,424 amortization

Income from 76,183 (77,953 ) 154,136 18,367 135,769 168,675 operations

Net interest 77,055 45,253 31,802 543 31,259 34,427 and other

(Loss) incomebefore income (872 ) (123,206 ) 122,334 17,824 104,510 134,248 taxes

Income tax(benefit) (587 ) (27,492 ) 26,905 3,961 22,944 29,084 expense

Net (loss) (285 ) (95,714 ) 95,429 13,863 81,566 105,164 income

Net (loss)incomeattributable (185 ) - (185 ) 209 (394 ) (668 )to noncontrollinginterests

Net (loss)incomeattributable (100 ) (95,714 ) 95,614 13,654 81,960 105,832 to WESCO International,Inc.

Preferredstock 1,276 1,276 - - - - dividends

Net (loss)incomeattributable $ (1,376 ) $ (96,990 ) $ 95,614 $ 13,654 $ 81,960 $ 105,832 to commonstockholders



Adjusteddiluted shares 42,260 42,009 42,009 44,661 ^(3)

Adjustedearnings per $ (0.03 ) $ 2.28 $ 1.95 $ 2.37 diluted share

Reflects merger-related transaction costs of $73.3 million and $78.0^ million, and merger-related financing and interest costs of $44.7 million(1) and $45.3 million for the three and six months ended June 30, 2020, respectively. These adjustments have been tax effected at a rate of approximately 22%.

^ Represents Anixter's results for the nine day period from June 22, 2020(2) to June 30, 2020.

Adjusted diluted shares for the three and six months ended June 30, 2020^ exclude the weighted-average impact of approximately 8.15 million shares(3) of common stock issued as equity consideration to fund a portion of the merger with Anixter.

Note: Adjusted consolidated net income attributable to common stockholders isdefined as net income (loss) attributable to common stockholders, plus: 1)merger-related costs, 2) merger-related financing and interest costs, and 3)preferred stock dividends, less the income tax effect of such merger-relatedadjustments (as applicable). Adjusted earnings per diluted share is computed bydividing adjusted net income attributable to common stockholders by theweighted-average common shares outstanding and common share equivalents,excluding the impact of common stock issued as equity consideration to fund aportion of the merger with Anixter. Adjusted WESCO net income attributable tocommon stockholders is defined as adjusted net income attributable to commonstockholders excluding nine days of legacy Anixter results. Adjusted WESCOearnings per diluted share is computed by dividing adjusted WESCO net incomeattributable to common stockholders by the weighted-average common sharesoutstanding and common share equivalents, excluding the impact of common stockissued as equity consideration to fund a portion of the merger with Anixter.The Company believes that these non-GAAP financial measures are useful toinvestors' overall understanding of the Company's current financial performanceand provides a consistent measure for assessing the current and historicalfinancial results.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200813005193/en/

CONTACT: Will Ruthrauff Director, Investor Relations and Corporate Communications (412) 454-4220 http://www.wesco.com